Nonferrous

SITTING IT OUT

Copper has been on quite a run throughout the past 18 months. Prices have soared far past any traditional metrics, and the frenzy over copper scrap availability has helped fuel much of the theft that has swept the country.

However, recent trends point to a fairly significant slowdown in the copper market. No one is saying it is a major correction from the fantastic run that has taken place. However, several handlers of the material say that more buyers, who had helped to drive the market earlier this year, are now sitting on the sidelines, even as copper prices slip.

A host of possible factors could be responsible for the decline in copper markets. One possible reason for the decline, according to several contacts, is the possibility of an end to a strike at a large copper mine in Chile. Another processor says that buyers are just not buying right now and are willing to sit on the sidelines, avoiding large buys.

As a result, inventory levels are growing, with several copper dealers saying they are having a more difficult time selling their processed copper scrap.

One scrap processor says that it is difficult to find any buyers for the material presently. He adds that spreads are widening, exacerbating the situation.

Some vendors have noted that the summer is typically a season when markets slow down. However, there doesn’t appear to be any signs that buyers are waiting until the end of the summer to start building up stocks. Even the Chinese market, which has been the key driver for copper, has been quiet, though several domestic buyers say that some buyers in China are showing modest interest.

Climbing inventories and softening orders could indicate a slowing economy, some vendors say. One Midwestern buyer says that tubing mills are not selling finished product, a further indication that the economy is softening.

While prices have been slipping, price levels still are far higher than traditional copper price indices, so some contacts say they feel copper prices could drop even further if orders remain muted during the next several months.

However, some market observers say that despite a sharp decline in copper scrap prices, they are still far greater than $3.25 per pound. In fact, according to the most recent figures from Kitco, while prices are down to around $3.40 per pound from a high of more than $3.70 earlier this summer, they are still higher than the $3.10-to-$3.20-per-pound range of early this summer.

More people say that the surging buying from Chinese consumers could cool as the Chinese economy may see a small "hiccup," causing temporary softening of the grade.

While copper, and aluminum, are showing signs of being overextended, nickel markets continue to show great strength. Reflecting the surge (and decline in stockpiles), the London Metal Exchange (LME) imposed restrictions on trading in light of severe shortages. According to the New York Times, since the beginning of this year, nickel inventories reported by the LME have declined by 83 percent, while prices have increased more than 100 percent.

(Additional news about nonferrous scrap, including breaking news and consuming industry reports, is available at www.RecyclingToday.com.)

INCO ENDS BID FOR FALCONBRIDGE

Canadian nickel miner Inco Ltd., Toronto, has announced that it is dropping out of the bidding war for competitor Falconbridge Ltd.

According to an Associated Press (AP) report, Inco’s departure probably means that European mining company Xstrata PLC now has a better chance of acquiring Falconbridge.

Inco fell short of a late July deadline to acquire enough Falconbridge shares to close on its proposed deal.

The Falconbridge board will meet to reconsider the Xstrata offer and where such a deal would stand with Canadian regulatory authorities.

According to the AP report, Xstrata already owns about 20 percent of Falconbridge and has been trying to acquire the remaining shares.

Inco is now turning its attention to its own pending acquisition. The company is considering bids from Phelps-Dodge and Teck Cominco Ltd.

ALCOA NAMES PREFERRED SCRAP SUPPLIERS

Alcoa Materials Management (AMM), Knoxville, Tenn., has selected its annual list of its top 10 scrap processors.

In 2004, AMM initiated the Strategic Scrap Supplier Program to ensure future scrap volume and quality requirements for Alcoa’s businesses. "The program’s goal is to increase scrap units by utilizing fewer scrap dealers and focusing on strategic dealers who work closely with the company on substantial volumes and annual and formula priced orders," Rich Markiewicz, vice president of AMM metal purchasing, says.

The criteria AMM uses to determine the list include the quality, volume and performance of its scrap suppliers.

AMM’s top 10 scrap suppliers for 2006 are:

Atlas Metal and Iron Corp., Denver;

Carolina Recycling Group, Lyman, S.C.;

Commercial Alloys of Twinsburg, Ohio;

Joseph Simon and Sons Inc., Tacoma, Wash.;

OmniSource Corp. of Fort Wayne, Ind.;

Shapiro Metals, St. Louis, Mo.;

Shine Brothers Inc., Spencer, Iowa;

Sturgis Iron and Metal, Sturgis, Mich.

Utah Metal Works, Salt Lake City; and

Weiner Iron and Metal, Pottsville, Pa.

PRIVATE EQUITY FIRM TO ACQUIRE ALERIS

Texas Pacific Group (TPG) has announced plans to acquire Aleris International in a deal worth an estimated $3.3 billion.

TPG, a private investment group with offices in San Francisco and Menlo Park, Calif., will pay $52.50 per share to acquire Aleris, based in the Cleveland, Ohio area. Additionally, TPG will assume around $1.6 billion in Aleris’s debt.

Aleris’s board of directors approved the merger agreement. Steven Demetriou, Aleris chairman and CEO, says, "After careful analysis, our board of directors has unanimously endorsed this transaction as being in the best interests of our stockholders."

Pending approval by stockholders, as well as all regulatory agencies, the deal is expected to be complete by early next year.

Aleris has grown significantly since the merger between Imco Recycling and Commonwealth Aluminum. Throughout the past year, the company has made five other acquisitions, including the Alumitech, ALSCO Metals, selected assets from Ormet Corp. and the downstream aluminum business of Corus Group.

In addition to manufacturing aluminum rolled products and extrusions, recycling aluminum and producing specification alloy, Aleris also recycles zinc and a manufactures zinc metal and value-added zinc products, including zinc oxide and zinc dust.

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